Bloomberg News

Cardinal Health Falls After Losing Walgreen Drug Contract

March 19, 2013

Cardinal Health Inc. (CAH:US), the second- largest U.S. drug distributor by revenue, dropped the most in almost four years after the company lost a contract to supply Walgreen Co. (WAG:US)’s pharmacies.

Cardinal fell 8.2 percent to $42.35 at the close in New York, its largest one-day decline since June 2, 2009. The shares have gained 2.7 percent in the past 12 months.

The contract with the largest U.S. drugstore chain expires at the end of August and won’t be renewed, Dublin, Ohio-based Cardinal said today in a statement. The move won’t hurt earnings for the 2013 fiscal year ending in June. Walgreen and Alliance Boots GmbH said they agreed to a partnership with AmerisourceBergen Corp. (ABC:US) to distribute drugs in a 10-year deal.

“We anticipate that investors’ sense of urgency to buy into shares could be limited for now,” Thomas Gallucci, an analyst with Lazard Capital Markets in New York, said in a note to clients. Gallucci downgraded his rating on Cardinal’s stock to neutral.

Cardinal will target a 2014 diluted earnings per share similar to its fiscal 2013 forecast (CAH:US) of $3.42 to $3.50 provided on Feb. 5, George Barrett, the company’s chairman and CEO, said in a statement.

“Although we are not yet ready to provide fiscal 2014 earnings guidance, our portfolio has considerable balance and we have prepared strategies to mitigate the impact of” the nonrenewal, Barrett said.

Walgreen, based in Deerfield, Illinois, is one of the drug distributor’s two largest customers and sales to the drugstore chain generated about 21 percent of the company’s consolidated revenue for fiscal 2012, Cardinal said.

To contact the reporter on this story: Anna Edney in Washington at aedney@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net


Tim Cook's Reboot
LIMITED-TIME OFFER SUBSCRIBE NOW

Companies Mentioned

  • CAH
    (Cardinal Health Inc)
    • $75.86 USD
    • -0.01
    • -0.01%
  • WAG
    (Walgreen Co)
    • $61.1 USD
    • 0.68
    • 1.11%
Market data is delayed at least 15 minutes.
 
blog comments powered by Disqus